Financial Crime World

France Toughens Banking Regulations to Combat Financial Crime

The French Authority for the Regulation of Financial Markets (AMF) has recently transposed the Fifth Money-Laundering Directive into French law, aimed at combating terrorist financing more effectively and guaranteeing transparency in financial transactions.

Background

The directive was proposed by the European Commission following the 2015 Paris terrorist attacks and the Panama Papers scandal. It aims to strengthen the fight against money laundering and terrorist financing, ensuring that France remains in line with international standards set by organizations such as the Financial Action Task Force (FATF).

Key Measures

Under the new regulations, financial institutions are required to implement several measures to prevent money laundering and terrorist financing, including:

  • Risk Assessment: Conducting regular risk assessments to identify potential threats
  • Client Identification and Verification: Verifying clients’ identities and beneficial owners
  • Due Diligence: Conducting due diligence measures throughout business relationships
  • Reporting of Suspicious Transactions: Reporting suspicious transactions to TRACFIN, France’s financial intelligence unit

Additionally, the directive introduces new obligations for legal entities and structures to provide transparency on their beneficial ownership. It also harmonizes enhanced due diligence measures for high-risk third countries and provides guidelines for virtual asset service providers, such as cryptocurrency exchanges and wallets.

Compliance Requirements

To ensure compliance with the regulations, financial institutions are required to:

  • Conduct Internal Audits: Conduct regular internal audits to identify any non-compliance
  • Report Findings: Report any findings to the AMF
  • Freeze Assets: Implement measures to freeze assets in cases where they are involved in terrorist financing activities

Existing French Law

The new regulations build on existing French law, which was transposed into the Monetary and Financial Code by an order dated December 1st, 2016. The code includes mandatory obligations for financial institutions to:

  • Identify and Verify Clients’ Identities: Identify and verify clients’ identities
  • Conduct Due Diligence: Conduct due diligence measures
  • Report Suspicious Transactions: Report suspicious transactions

National Risk Assessments

In addition to European-level regulations, France has its own national risk assessments in place. The AMF publishes regular risk analyses to help financial institutions identify threats, vulnerabilities, and levels of risk.

These assessments are available on the AMF’s website, along with guidance documents and recommendations for financial institutions to comply with the regulations.

Conclusion

The new regulations aim to strengthen France’s fight against money laundering and terrorist financing, ensuring that the country remains in line with international standards. With the implementation of these measures, France is taking a significant step towards reducing the risks associated with financial crime and protecting its financial system.